The Greek crisis has interestingly thrown into sharp relief the power struggle between the US Government and Germany in what the latter considers its backyard. Who caves will have reverberations about limits of the other’s power.
July 9, 2015
As I predicted 3 days ago, the United States Government has got heavily involved in preventing a Grexit using the IMF, France and its allies in the EU.
The reasons I cited were
Geopolitics – the value of Greece to USG driven geopolitics (not as important to Germany)
Contagion – the higher unease that USG has about the risks of a Grexit, than the more sanguine Germans
Economic Strategy – a fundamental difference in how the USG sees managing a debt crisis – less austerity, more QE – than the Germans.
USG Pressure Ratcheting Up
As evisaged, the USG has unleashed the dogs to make the Germans include “debt restructuring” as part of any deal.
The U.S. media who’re part of the USG messaging framework are all over this; examples
Washington Post: “Germany failed to learn from its own history – and Greece paying the price”
Bloomberg “Proof that Merkel is Europe’s Economic Bully”
Germans Hardening Their Stance
The Germans for ther part have further solidified their stance: Debt Structuring is out.
Meanwhile the Greeks Are Caving…
At this point Tsipras has a choice of
(A) Caving completely and accepting the uncompromising German terms of surrender (another Treaty of Versailles)
(B) Grexit and dealing with the consequences unless the USG prevails.
The Geopolitical Implications
This is not about the Greeks anymore. It has become about the big dogs: USG will versus German stubbornness. The geopolitical implications of what happens next are huge.
The Germans can throw the Greeks a bone and include some sort of debt restructuring plan. But that would be conceding ground to USG pressure.
Or the Germans, who caved to the USG on Ukraine despite severe economic blowback; on the NSA spying of its Chancellors and minister despite the obvious humiliation; on having its territory used for USG drone attacks despite the potential illegality, can ignore – that is defy – USG pressure.
This very public signal of independence would be very significant.
A Mafia Analogy
Extending what I wrote before under the section “Limits of USG Power“, think of the USG like the Godfather of a bunch of Mafia families. One of them, the EU is headed by a leader that the Godfather always views with some suspicion, and who is beating up on a member of its family for breaking its rules and “talking back”.
The Godfather has asked the Family head to ease up on the beating since no good can come of it for anyone and forgive the transgressions a bit (like was done to the Family Head not so long also), enlisting other member of the EU Family to assist in this viewpoint. The Family head has dug in further and says “No way. Rules are rules.”
This now then is not about the poor schmuck who’s getting beat up any more. Can the Godfather risk the implications of being defied? Is the Family head finally asserting himself?
Tune in to the real life version of the Sopranos.
Meanwhile as I predicted in the Epilogue earlier, the Russians have clearly announced they cannot help out.
Here’s what Putin said at a Q&A on July 10, 2015